Dispute Resolution Mechanisms in the Petroleum Sector

7. Environmental Protection and Human Rights

Arbitration as a dispute settlement mechanism is favoured by the private sector due to its neutrality; however, environmental and human rights issues during petroleum development in local communities may arise alongside commercial issues, and it is possible that tribunals located at some distance from the communities concerned will deal with these non-commercial matters. This issue arises particularly when the state invokes human rights and environmental law violations as a defence for adopting measures that impact on investor rights under the investment agreement. There is no persistent practice in arbitration as a method for resolving such disputes but some known cases are described below.

In this dispute concerning the expropriation of land to establish a natural preserve, the arbitral tribunal ruled that the international rules for the protection of foreign investment would take precedence over any rules of environmental protection.

In this case, Nigerian citizens filed a suit against Chevron Nigeria Ltd., a subsidiary of Chevron USA in a U.S. federal court alleging human rights violations perpetrated in Nigeria were backed by Chevron. The suit was decided on December 1, 2008, when nine jurors unanimously agreed Chevron was not liable for any of the numerous allegations. Judgment was entered the next day, officially exonerating Chevron.

This case involves a claim against ExxonMobil filed in a U.S. federal court alleging that the company was deceitful in human rights abuses committed by Indonesian security forces in the province of Aceh. In a decision issued in July 2015, the U.S. federal court ruled that the plaintiffs' claims sufficiently "touch and concern" the United States and may proceed in US court.

A complaint was made by the affected people by the cross-border pipeline to the UK "national contact point" for the Paris-based Organisation for Economic Co-operation and Development (OECD), which lays down guidelines for the operation of multinationals. The report found that "the [pipeline] company failed to identify specific complaints of intimidation against affected communities by local security forces where the information was received outside of the formal grievance and monitoring channels, and, by not taking adequate steps in response to such complaints, failed to adequately safeguard against the risk of local partners undermining the overall consultation and grievance process,"